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Media Alerts - Jacoby & Meyers v. The Presiding Justices
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March 27, 2017
  Jacoby & Meyers v. The Presiding Justices
Headline: Second Circuit Rejects First Amendment Challenge to New York's Prohibition of Non-Lawyer Investment in Law Firms

Area of Law: Constitutional Law

Issue Presented: Whether New York State's prohibitions on non-lawyer investment in law firms violate lawyers' First Amendment rights to associate with clients and access the courts.

Brief Summary: Jacoby & Meyers brought a putative class action challenging New York's rules, regulations and statutes that collectively prohibit non-attorneys from investing in law firms. The complaint alleged that the additional capital from such investors would allow firms to improve the quality of their legal services and reduce their fees. The United States District Court for the Southern District of New York dismissed the complaint, and the plaintiffs appealed. The Second Circuit affirmed, explaining that "in the context of for-profit law firms who serve their clients' interests as a business," the First Amendment associational right "belongs to the client, not the attorney." Moreover, even assuming for the sake of argument that for-profit law firms "could be found to have some degree of First Amendment right to associate with clients or to petition the government through the courts on their clients' behalf," the complaint failed because the prohibitions were rationally related to a legitimate government interest.

Extended Summary: New York, like many other states, prohibits non-attorneys from investing in law firms. "The prohibition is generally seen as helping to ensure the independence and ethical conduct of lawyers." Jacoby & Meyers, LLP, a limited liability partnership (the "LLP"), and Jacoby & Meyers USA II, PLLC, a related professional limited liability company (the "PLLC"; together, "plaintiffs" or the "J&M Firms") brought a putative class action challenging the various New York state rules, regulations, and statutes that collectively prohibit such investments. They alleged that they had received offers from various sources (including "high net-worth individuals" and "institutional investors) to invest capital in exchange for owning an interest in the firm, and that this funding would enable them to represent their clients more effectively. They argued that "the state regime unlawfully interferes with their rights as layers to associate with clients and to access the courts - rights they see as grounded in the First Amendment."

The United States District Court for the Southern District dismissed the complaint, and the plaintiffs appealed. The Second Circuit affirmed the dismissal. First, the court explained that the First Amendment associational right likely did not apply to for-profit law firms. The court noted that the "Supreme Court has held that the First Amendment bears on some situations in which clients and attorneys seek each other out to pursue litigation," but all of those situations were distinguishable. In particular, there is one line of cases involving political advocacy organizations' ability to recruit and solicit clients, and another line of cases involving clients' ability to collectively seek legal counsel. "The Supreme Court has never held, however, that attorneys have their own First Amendment right as attorneys to associate with current or potential clients, or their own right to petition the government for the redress of their clients' grievances when the lawyers are acting as advocates for others, and not advocating for their own cause," the court explained. The court was skeptical that such First Amendment rights were possessed by for-profit law partnerships or PLLCs that were not engaged in their own political advocacy or expression.

Acknowledging, however, that "the law is evolving rapidly with respect to the protections afforded commercial speech by the First Amendment," the court went on to consider whether--assuming that the plaintiffs did possess some degree of First Amendment rights here--those rights were violated by the New York prohibition. It concluded that they were not. It rejected the plaintiffs' argument that strict scrutiny should apply here, explaining that because there was no substantial burden on a First Amendment right, only rational basis review applied. Because the regulations were rationally related to a legitimate governmental interest - namely, New York State's "well-estalbished interest in regulating attorney conduct and in maintaining ethical behavior and independence" - they "easily pass[ed] muster."
To read the full opinion, please visit: http://www.ca2.uscourts.gov/de...8fb11aeca48/1/hilite/

Panel: Circuit Judges Lynch and Carney, District Judge Hellerstein

Argument Date:
8/19/16

Date of Issued Opinion: 3/24/17

Docket Number: 15-2608

Decided: Affirmed

Case Alert Author: Belino Voshtina

Case Alert Supervisor: Emily Gold Waldman

Counsel: Douglas Gregory Blankinship, Finkelstein, Blankinship, Frei┬┐Pearson & Garber, LLP, White Plains, New York for Appellants.

Andrew Rhys Davies, Assistant Solicitor General (Barbara D. Underwood, Solicitor General, Steven C. Wu, Deputy Solicitor General, on the brief), for Eric T. Schneiderman, Attorney General of the State of New York, New York, New York, for Appellees.

Author of Opinion: Judge Carney

Circuit: Second Circuit

Case Alert Circuit Supervisor: Professor Emily Gold Waldman

    Posted By: Emily Waldman @ 03/27/2017 07:36 PM     2nd Circuit  

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